It Makes News Sense—But Not Money Sense Yet

The American Journalism review had a story about a local news website chain failure. Exactly the kind of business you’d think would make sense and money these days. But not yet.

“By early 2007, had grown to 13 sites serving towns around Washington, Chicago and the San Francisco Bay area. The partners began talking about creating as many as 160 sites in 16 markets.

And then? And then the bottom dropped out. Backfence’s rapid expansion burned up its $3 million war chest. The partners have split; Backfence’s staff, which once numbered as many as 25, was laid off. The company’s online communities are largely ghost towns now. “We ran out of money,” says a somewhat chastened Potts today. “And we ran out of runway.”

As big-media companies and entrepreneurs alike rush into the hyperlocal arena it’s worth pausing and asking: Is there a real business in this kind of business?

So far–and admittedly it’s still very early –the answer is no. A few of the estimated 500 or so “local-local” news sites claim to show a profit, but the overwhelming majority lose money.

In fact, many operators don’t really have a business model. A full 80 percent said their sites either weren’t covering their operating costs–or that they just weren’t sure. Only 10 of the 141 said they were breaking even or earning a profit.

These days, the category’s shining star–the anti-Backfence–is, a scrappy, snarky local-news-and-commentary site that covers the tony New York City suburbs of Montclair and Bloomfield in New Jersey. Co-owned by a novelist (Debbie Galant) and a journalist (Liz George), the site attracts about 80,000 unique visitors a month, Baristanet has gotten so much buzz that Galant and George have recently branched out as consultants to other hyperlocal entrepreneurs.

But Baristanet (the name was picked to conjure news “baristas” serving up daily scoops) isn’t exactly a big business. In fact, it’s just barely a small one. The site generated about $60,000 in revenue last year. That’s enough for Galant and George to hire a full-time freelance editor and a few part-time employees. Its owners aren’t quitting their day jobs.

“As soon as the money’s there, I’ll commit to it” full-time, says George, a special sections editor at New York’s Daily News. “We’re growing, but we’re not there yet.”